Minimum pricing or volumetric taxation? Quantity, quality and competition effects of price regulations in alcohol markets

Céline Bonnet, Fabrice Etilé and Sébastien Lecocq
Additional contact information
Céline Bonnet: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

PSE Working Papers from HAL

Abstract: Reforming alcohol price regulations in wine-producing countries is challenging, as current price regulations reflect the alignment of cultural preferences with economic interests rather than public health concerns. We evaluate and compare the impact of counterfactual alcohol pricing policies on consumer behaviors, firms, and markets in France. We develop a micro-founded partial equilibrium model that accounts for consumer preferences over purchase volumes across alcohol categories and over product quality within categories, and for firms' strategic price-setting. After calibration on household scanner data, we compare the impacts of replacing current taxes by ethanol-based volumetric taxes with a minimum unit price (MUP) policy of C0.50 per standard drink. The results show that the MUP in addition to the current tax outperforms a tax reform in reducing ethanol purchases (-15% vs. -10% for progressive taxation), especially among heavy drinking households (-17%). The MUP increases the profits of small and medium wine firms (+39%) while decreasing the profits of large manufacturers and retailers (-39%) and maintaining tax revenues stable. The results support the MUP as a targeted strategy to reduce harmful consumption while benefiting small and medium wine producers. This study provides ex-ante evidence that is crucial for alcohol pricing policies in wine-producing countries.

Keywords: Alcohol; Corrective taxes; Minimum price; Demand modelling; Market structure alcohol; Market structure (search for similar items in EconPapers)
Date: 2025-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-05132437v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://shs.hal.science/halshs-05132437v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:halshs-05132437

Access Statistics for this paper

More papers in PSE Working Papers from HAL
Bibliographic data for series maintained by CCSD ().